Forum of Power Utilities proposed by Electricity Regulatory Commissions of states and the centre

All distribution utilities – both private and state-owned would be its members. The proposed forum is expected to function as a platform for sharing best practices in the power sector, exchange experiences on technology up-gradation processes, help efficiency improvement, offer solutions for operational issues, facilitate interaction with academia and research institutions and develop standards and benchmarks.Debjoy Sengupta | ETEnergyWorld | April 19, 2016, 22:54 IST

The Forum of Regulators is a body of Electricity Regulatory Commissions of states and the centre. It is likely to provide the initial help for forming the Forum of Power Utilities.

All distribution utilities – both private and state-owned would be its members. The proposed forum is expected to function as a platform for sharing best practices in the power sector, exchange experiences on technology up-gradation processes, help efficiency improvement, offer solutions for operational issues, facilitate interaction with academia and research institutions and develop standards and benchmarks.

According to minutes of a meeting of Forum of Regulators held on Monday, post unbundling there are around 60 distribution companies in the country, however, most of them remains state owned except in few pockets like Mumbai, Delhi, Ahemdabad, Surat and Kolkata.

“Despite distribution being a regulated business with 15.5% and 16% return on equity, state-owned discoms have not fared well at all, however, private entities have consistently reported profits,” said a power sector official.

“Efforts made through ―distribution franchise model have not succeeded given the paucity of funds for capital expenditure,” he said.

Cumulative losses of all state-owned discoms stood around Rs 3,80,000 crore with an aggregate debt of Rs 4,83,000 crore on March 15, 2015. Average loss per annum has been between Rs 60,000 crore and Rs 70,0000 crore with 90% of the losses in Rajasthan, Uttar Pradesh, Tamil Nadu, Haryana, Madhya Pradesh, Andhra Pradesh and Jharkhand.

Further, losses in Rajasthan, Uttar Pradesh and Tamil Nadu alone are estimated between Rs 15,000 crore and Rs 16,000 crore per state per annum. Reasons for such dismal performance by the distribution utilities include, high aggregate transmission and commercial losses (more than 30%), more than 50% gap in supply cost and revenue realization, poor financial and operational management of the discoms, poor distribution network infrastructure, lack of metering and poor maintenance leading to breakdowns and poor reliability of service etc.

Despite several schemes initiated by the government, including UDAY, the distribution sector continues to saddle with huge financial losses and therefore considered to be financially unviable.

However, in absence of a structured forum or association of distribution utilities, the issues collectively faced by the distribution utilities are not represented appropriately before the central and state governments and regulatory authorities.

“Such an association can facilitate sharing of global and industry-wide best practices, take up common issues, prepare strategy and organize specialized training for capacity building,” said a power sector official.

The proposal for formation of the association being in its nascent stage, the Forum of Regulators was requested to facilitate hand holding of the Association till it starts functioning on its own to achieve its goals.